The escalating conflict in the Middle East and rising geopolitical risk are causing a sharp market reshuffle, directing investors toward the energy sector, defense, commodities, and inflation-protected assets as volatility intensifies.
The destabilizing shock has shaken global markets, raising concerns about inflation and sectoral upheaval as military escalation in the Middle East intensifies. Nigel Green, CEO of financial consulting firm Devere Group, stated on June 22 that President Donald Trump's strikes on Iranian nuclear facilities are fundamentally reshaping investor expectations.
"The U.S. strike on Iran's nuclear facilities is a defining moment for the market," said Green, emphasizing:
This is a direct blow to the assumptions that drove investor positioning: lower inflation, falling rates, and stable energy prices. This structure has just been disrupted.
With markets opening, investors are bracing for extreme volatility, as rising oil prices draw fresh attention to inflation forecasts. Brent oil prices faced further increases amid concerns over Iran's retaliation and disruptions in the Strait of Hormuz. Analysts are now warning that prices could rise to $130 per barrel depending on Iran's reaction. Green cautioned: "Such a price shock will filter through global inflation, which remains high and/or persistent in many regions." He added that the expected rate cuts by central banks, such as the Federal Reserve, may no longer be possible: "Sustained high oil prices make rate cuts very difficult to justify. If inflation rises again, policymakers responsible for monetary policy will have to hold back and possibly even reconsider the easing course altogether."
The emerging crisis may redirect capital from interest-sensitive sectors into energy, commodities, defense, and national security-related companies. "With increasing military budgets in several developed economies, companies related to security, surveillance, aerospace, and arms manufacturing are well-positioned to capitalize on rising demand," explained Green. He noted that flows into safe assets could support gold and inflation-linked bonds, while the U.S. dollar may strengthen in the short term before long-term vulnerabilities arise: "This is not 2019. We are now in a tighter, more fragile system, with less margin for error," he expressed.
"Investors cannot afford to wait and see. They need to react now, reposition portfolios, and focus on sectors and strategies that can withstand prolonged uncertainty," emphasized Green. He concluded:
The time for passive optimism has passed. This strike marks a turning point. Smart investors are already repositioning, while those who hesitate risk finding themselves in a vulnerable position.
